Thursday, April 26, 2007

Apple Computer (NASDAQ:AAPL): Strong results

Lots of positive commentary on Apple (NASDAQ:AAPL) after co reported strong Q1 results last night:

- According to Piper Jaffray the key question is: are we at the peak of EPS upside or is thissustainable? They believe we are not at the peak of EPS upside, given the firm believesApple is entering what will be the 3 strongest quarters in the company's history withthe following catalysts: 1) iPhone, 2) new product in Jun/Sep (video iPod, tabletMac, or other new consumer product), and 3) continued Mac market share gains. The more important point is that Apple has the pole position as it capitalizes in ashift in computer buying behavior. It is obvious consumers want computing devices that are focused on entertainment and creativity. To date, they have not seen any credible competitive threats in Apple's core markets (Zune is a flop in the MP3space and Dell & HP have failed to deliver PCs that rival the Mac). PJ believes thatin the coming quarters Apple will hold its massive lead in portable audio and grow share in the personal computer market. Maintains Outperform and ups tgt to $140 from $123.

- Goldman Sachs notes that even eliminating the help that Apple received from favorable component costs, the company still produced over a $0.10 beat to consensus earnings estimates in what should have been its toughest quarter, setting the tone for the rest of the year. Apple is right in front of a major change to its business model which, if anything, will increase the quality of what is already a strengthening model, delivering more predictable revenue and margin leverage. Firm's new earnings estimates for calendar 2007 and 2008 are $3.52 and $4.09, up from previous $3.16 and $3.89, respectively. Moves tgt to $120 from $110.

- Morgan Stanley notes they are keeping their $110 target for now but feel incrementally more confident that the $160 bull case scenario will play out in the next 12 months. Remains Overweight.

Notablecalls: AAPL no doubt produced strong results. The stock hit $102 level in after hours action, up 7 points from the close. The iPod number was a bit shy of estimates but the Mac performance coupled with lower components cost more than compensated for the difference. Also, pricing was firm. I would not be surprised to see AAPL surpass the $102 level early on as estimates and price tgts are raised across the board. That's my ultra-st view.

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